Market Stoop Deepens as International and Home Pressures Persist:
In October 2024, the Nifty 50 and S&P BSE Sensex suffered notable drops of 6.22% and 5.83%, making this their weakest month-to-month efficiency since March 2020. Pushed by a mixture of world and home pressures, Indian equities declined sharply, with key indices hitting new lows for the month. This downward momentum has continued into November, however a brief uplift seen through the Muhurat buying and selling day.
The market confronted persistent weak spot as a consequence of softer-than-expected Q2 FY25 earnings, which solid doubt on the tempo of financial development. Many corporations reported earnings under expectations, resulting in a wave of earnings downgrades and dampening investor sentiment. Among the many Nifty corporations which have disclosed outcomes, earnings remained principally stagnant year-over-year, highlighting strain from subdued company efficiency in key sectors.
October additionally noticed one of many highest month-to-month international portfolio investor (FPI) outflows on document, with ₹1.14 lakh crore withdrawn from the secondary market, surpassing outflows seen on the onset of the COVID-19 pandemic. Regardless of this pattern, FPIs remained lively in major markets, with practically ₹20,000 crore invested, probably reflecting selective alternatives amid excessive valuations within the secondary market.
The document outflows contributed to a weakening rupee, which dropped to an all-time low of ₹84.20 in opposition to the US greenback. Moreover, China’s upcoming potential stimulus announcement, may additional affect capital flows from Indian markets.
On the home entrance, indicators of slowing city demand added to the market’s challenges, as rising dwelling prices and meals inflation have constrained client spending, eroding buying energy Heightened market volatility has additionally been pushed by exterior components, together with the strengthening US greenback, Center East geopolitical tensions, and rising crude oil costs.
Sectoral efficiency:
Throughout Indian equities, October introduced important sectoral corrections in response to the broader market decline. The monetary sector confronted challenges amid issues over slowing credit score demand and softened earnings development. The patron items sector noticed pressures as a consequence of a noticeable pressure on city client spending, pushed by rising inflation and better dwelling prices. The automotive sector equally skilled a slowdown, with decreased client demand and elevated enter prices impacting gross sales and manufacturing. Infrastructure and engineering sectors struggled as authorities spending tapered off, constraining development inside these areas. Lastly, vitality and commodities had been impacted by broader market volatility and a latest improve in crude oil costs, which intensified the pressure on these sectors.
Within the following sections, we offer a extra complete examination and detailed insights of some main sectors:
Auto:
In October 2024, the auto sector displayed blended outcomes throughout segments, reflecting each development and challenges. The 2-wheeler (2W) market skilled sturdy momentum, with home wholesale volumes rising by round 11% year-over-year (YoY) and 6% month-over-month (MoM). Exports on this section additionally rose by 23% YoY and a pair of% MoM. Home passenger automobile (PV) gross sales grew modestly at 1-3% YoY and noticed a 10-12% MoM enhance, pushed primarily by choose producers, though beneficial properties had been partially offset by underperformance amongst others. Business automobiles (CVs) confirmed secure gross sales YoY, with a MoM improve of 9%, largely supported by excessive bus volumes, whereas medium and heavy truck volumes confronted pressures.
Throughout the PV section, home gross sales posted a modest development fee of roughly 3% YoY, though efficiency various. Some segments, reminiscent of SUVs, noticed sturdy development, whereas others, significantly entry-level automobiles, reported declines. Sturdy PV gross sales development was noticed amongst a number of producers, though choose manufacturers reported flat or damaging outcomes, tempering total beneficial properties.
Within the CV section, home dispatches rose barely, up 1% YoY and 9% MoM. Whereas demand for buses drove development, medium and heavy industrial vehicles lagged, with development forecasts for FY25 remaining low as a consequence of excessive base results, restricted fleet utilization, and reasonable alternative demand. Anticipated development for CVs is anticipated to stay within the low single digits.
The 2-wheeler section continued its sturdy efficiency, with total dispatches rising roughly 13% YoY. Home 2W gross sales elevated by 11% YoY, whereas exports additionally noticed a notable rise. Components contributing to 2W development embrace pent-up demand in rural areas, new mannequin introductions, and festive season promotions.
Within the tractor sector, home wholesale volumes recorded an encouraging uptick of 29% YoY for October, supported by favorable agricultural situations reminiscent of sturdy monsoon rainfall, improved reservoir ranges, and a profitable Kharif harvest. These situations, together with favorable Rabi season phrases, are anticipated to bolster tractor demand within the coming months.
Wanting forward, the medium-term outlook favors development within the 2W section over PV and tractor gross sales, whereas the CV section stays cautious, with efficiency seemingly constrained by financial and industry-specific components.
IT:
In Q2 FY25, the IT companies sector (together with Tier-1 and Tier-2 corporations) noticed continued restoration in working efficiency, with median sequential development at 2.0% in fixed forex, up from 1.2% within the earlier quarter. Reported development in USD phrases additionally improved, reaching 2.6% quarter-over-quarter (QoQ) and 4.3% year-over-year (YoY), benefiting from favorable forex results. Progress momentum was broad-based, marking two consecutive quarters of stability, although some asset-intensive and consumer-focused verticals displayed softer outcomes.
The deal setting remained sturdy, with deal whole contract worth (TCV) for each Tier-1 and Tier-2 companies near USD 20 billion, displaying solely a minor lower from the earlier quarter’s USD 21 billion. Elevated discretionary spending and short-term tasks are anticipated to reinforce deal conversions, regardless of difficult macroeconomic situations. Consequently, annual contract worth (ACV) is more likely to rise, aided by bettering conversion charges.
Headcount additions confirmed substantial development, indicating optimistic mid-term demand tendencies, with many corporations reaching optimum utilization and decreasing subcontractor reliance. Nonetheless, ongoing geopolitical tensions could decelerate gross sales cycles and introduce further scrutiny round deal closures. Whereas margins confirmed enchancment past expectations in Q2, the scope for additional beneficial properties in FY25 could also be restricted as a consequence of wage hikes deferred to the second half and absolutely optimized price levers.
Income development for Tier-1 corporations was at 1.4% QoQ in fixed forex, whereas Tier-2 corporations outperformed at 2.9% QoQ, reflecting higher momentum within the latter. Progress throughout main verticals reminiscent of BFSI, retail, manufacturing, and communications aligned for the second consecutive quarter, displaying constant sectoral restoration. Working margins had been secure, with Tier-1 corporations reaching a slight 20 foundation level enchancment, whereas Tier-2 noticed a modest 30 foundation level decline as a consequence of compensation changes, which most companies absorbed with restricted affect on margins.
Wanting ahead, IT companies corporations sometimes see stronger efficiency within the first half of the fiscal 12 months, with the second half usually impacted by seasonal furloughs and holidays. This 12 months, most Tier-1 companies anticipate an identical furlough impact to final 12 months, although some corporations anticipate a milder affect. Sure Tier-2 companies are optimistic about reaching industry-leading development, pushed by a powerful deal pipeline and development in choose verticals..
Metals:
In October 2024, Indian metal costs noticed a modest improve of two.1% month-over-month (MoM), reaching ₹48,000 per tonne, whereas Chinese language metal costs surged by 7.4% MoM to $510 per tonne. The rise in metal costs was accompanied by a 4.9% improve in coking coal costs, which reached $170 per tonne, pushed by expectations of bettering metal demand. Nonetheless, Indian metal manufacturing in September 2024 decreased by 4.9% to 11.7 million tonnes, whereas Chinese language metal manufacturing additionally declined by 1.0% MoM to 77 million tonnes. International metal manufacturing confirmed an identical downward pattern, falling by 0.8% MoM to 144 million tonnes.
One notable improvement was the 6.8% MoM and 25.9% YoY improve in Chinese language metal exports, which reached the very best degree lately. This surge in exports, pushed by weak home demand in China, stays a priority for the worldwide metal market, as elevated exports from China may put strain on costs in different areas.
On the enter aspect, home iron ore costs noticed a major improve of 25.4% MoM to ₹7,400 per tonne, whereas worldwide iron ore costs declined by 4.3% MoM to $96 per tonne. Moreover, manganese costs fell by 25.6% MoM to ₹16,041 per tonne, reflecting a blended pattern in metal inputs.
Within the non-ferrous metals market, costs trended downward in October 2024. Aluminium costs decreased by 0.7% MoM to $2,592 per tonne, whereas copper and zinc costs fell by 3.3% and 0.8% MoM, respectively, to $9,506 and $3,031 per tonne. These declines had been attributed to weaker demand from consuming industries.
Wanting forward, China’s metal manufacturing decline and document export ranges point out weaker home demand as a consequence of an ongoing slowdown within the Chinese language financial system. Nonetheless, the financial stimulus launched by China in October 2024 has offered a optimistic affect on each world and home metal costs. The sharp will increase in coking coal and home iron ore costs may put strain on the margins of some Indian metal corporations within the coming quarter. Regardless of these challenges, home metal demand in India stays sturdy and is anticipated to develop by 8-10% in FY25.
Whereas the outlook for home metal demand stays optimistic, the excessive valuations of metal corporations restrict additional upside potential. Consequently, the outlook for the metal sector stays impartial.
Chemical compounds:
The chemical sector skilled a broad improve in costs throughout October 2024, with a number of merchandise displaying optimistic month-over-month (MoM) motion. A notable instance was the numerous rise in caustic soda lye costs, which surged from ₹35/kg to ₹43/kg, benefiting key {industry} gamers. The agrochemical sector is anticipated to see gradual demand restoration within the latter half of FY25, providing a possible development enhance. Moreover, sure areas throughout the pharmaceutical sector are reporting sturdy development, significantly in specialised therapies. Corporations which might be advancing in complexity and scale are more likely to see substantial long-term advantages.
Whereas some pricing tendencies had been optimistic, others confirmed a blended image. Costs for Maleic Anhydride and Phthalic Anhydride fell by 3% MoM, resulting in a slight affect on producers in these segments. On the flip aspect, TDI costs elevated by 5% MoM, which benefited producers on this market. Different commodities, reminiscent of Heavy Soda Ash and Acetic Acid, additionally noticed a lower in costs, down by 3% and a pair of% MoM, respectively.
Wanting forward, the commodity chemical substances section is anticipated to take care of a gentle, range-bound pattern as a consequence of secure home demand. Nonetheless, competitors from Chinese language producers stays a major issue, persevering with to place strain on costs, particularly within the commodity house. Corporations targeted on high-value merchandise and people increasing their capabilities into extra complicated and scalable choices are anticipated to carry out higher than these counting on primary commodities in the long run.
Necessary occasions & updates
A number of essential occasions of the final month and upcoming ones are as under:
- India’s infrastructure output grew by 2% year-on-year in September 2024, recovering from a 1.8% decline within the prior month.
- The HSBC India Manufacturing PMI hit 57.5 in October 2024, up from 56.5 in September, reflecting stronger output development and a surge in new orders, the quickest in practically 20 years.
- The HSBC India Companies PMI was revised as much as 58.5 in October 2024, surpassing the flash estimate of 57.9 and September’s studying of 57.7. It marked the thirty ninth straight month of development in companies, pushed by sturdy gross sales and demand, exceeding expectations of 58.3.
- The HSBC India Composite PMI rose to 59.1 in October 2024, up from 58.3 in September, marking 39 months of development. Stronger new orders in manufacturing and companies boosted gross sales and employment.
- India’s annual inflation fee surged to six.21% in October 2024, up from 5.49% in September, exceeding expectations of 5.81% and reaching the very best degree in over a 12 months. This marks a continued deviation from the RBI’s 4% goal, intensifying expectations of delayed fee cuts.
- The US Fed reduce their rate of interest by 0.25% this month.
Elementary outlook:
India’s market outlook stays optimistic, regardless of dealing with a number of world and home headwinds. Key financial indicators level to a resilient and adaptive financial system that’s progressively shifting in direction of sustainable development. Regardless of a difficult October, the home financial system is displaying indicators of underlying power, significantly inside sectors which might be experiencing structural transformations.
Whereas inflation rose to six.21% in October, pushed by meals costs and monsoon affect, stays manageable. The RBI’s vigilant financial coverage and secure foreign exchange reserves supply a sturdy buffer in opposition to exterior shocks, particularly with foreign exchange reserves remaining properly above the $600 billion mark. This offers the central financial institution with flexibility to handle forex fluctuations and inflationary pressures, instilling investor confidence in India’s macroeconomic stability.
India’s digitization push continues to realize momentum. The surge in UPI transactions to document highs is a optimistic indicator of accelerating digital adoption throughout the nation. This indicators wholesome development within the companies sector, with the Companies PMI rising to 58.5 in October. The sturdy demand in companies, alongside India’s sturdy efficiency in manufacturing, highlights the nation’s numerous financial base, making it extra resilient to world downturns. Moreover, home energy consumption, although modest, displays a seasonal slowdown fairly than a structural decline, pointing to regular demand restoration within the medium time period.
India’s excessive foreign exchange reserves place the nation as probably the most well-positioned rising markets globally. The resilience of those reserves, coupled with authorities reforms and strategic fiscal measures, is fostering investor optimism. The secure macroeconomic indicators, together with the supportive insurance policies, are more likely to maintain India’s development trajectory intact, even amid world uncertainties.
In conclusion, whereas there are pockets of concern, India’s fundamentals stay sturdy. The restoration in companies, the rising digital financial system, and a stable fiscal and financial framework paint an optimistic image for the Indian market within the coming months. The nation is poised for regular development, and long-term buyers could discover favorable alternatives in sectors that capitalize on digital transformation, consumption, and infrastructure improvement.
Technical outlook.
The Indian fairness market presents an optimistic outlook because it navigates by means of short-term volatility. Whereas the main indices noticed important declines in October 2024, the market is poised for a possible rebound, supported by sturdy technical indicators and favorable high-frequency knowledge factors in 2025.
The Nifty 50 index, having confronted a correction in October, is at present testing key assist zones round 23,800-23,300. These ranges supply potential shopping for alternatives as they align with long-term bullish tendencies. A profitable rebound from these ranges may sign a transfer in direction of the subsequent resistance zones close to 24,600-25,200, which can set off a extra sustained rally. A break above these resistance factors may pave the way in which for additional upside momentum.
The broader market is witnessing elevated exercise in sectors aligned with India’s development story. The Companies sector, as indicated by the rise in Companies PMI to 58.5, stays a key space of power, and its continued enlargement helps a optimistic technical outlook for shares associated to digital funds, IT, and client companies.
Different high-frequency indicators proceed to color an optimistic image for India’s long run market outlook. The secure upward trajectory in UPI transactions signifies that the digital financial system will stay a core development driver. The modest improve in energy consumption additionally factors to resilience within the home financial system, whilst we transfer into winter. This stability is mirrored in India’s foreign exchange reserves, which, whereas barely decrease in October, stay at excessive ranges, offering a stable basis for the Indian Rupee and providing assist to broader market sentiment.
The market has skilled a correction primarily as a consequence of disappointing q2 outcomes however because the valuation corrects it offers good alternative in some pockets.
Outlook for the International Market
US Market:
The U.S. Federal Reserve not too long ago reduce rates of interest by 1 / 4 of a share level, reducing the benchmark in a single day rate of interest to the vary of 4.50% to 4.75%. This transfer displays a recognition of a labor market that has “usually eased” whereas inflation continues to maneuver towards the central financial institution’s 2% goal. The Fed’s resolution was unanimous, signaling confidence within the ongoing financial enlargement regardless of a cooling job market. The central financial institution is anticipated to proceed chopping charges, with projections putting the federal funds fee between 3.00% and three.25% by the tip of 2025. This ongoing easing of financial coverage will seemingly proceed to assist financial exercise and investor sentiment.
The third-quarter earnings season within the US has largely unfolded as anticipated, with the financial system performing stronger than initially anticipated, regardless of latest rate of interest cuts by the Federal Reserve. This sturdy development has allowed most corporations to fulfill or exceed earnings expectations. Nonetheless, the main target has shifted to fourth-quarter steerage, which has been extra conservative. Regardless of stronger-than-expected financial exercise, many companies are getting ready for a slowdown in This autumn, resulting in cautious income forecasts.
A optimistic improvement has been the effectiveness of cost-cutting measures applied earlier this 12 months. These efforts have led to improved working margins, serving to corporations which have reported stable earnings for Q3, even when their future outlooks are weaker. Whereas corporations which have missed earnings expectations have seen important declines in inventory costs, these with sturdy outcomes however conservative steerage have seen muted reactions. On condition that market valuations stay above honest worth, near-term index appreciation is proscribed, however the market could stay overvalued till earnings development catches up.
Outlook for Gold
Gold costs in India have continued to face strain, with latest market actions indicating that this pattern may persist by means of mid-November. As of November 13, 2024, home gold costs reacted to India’s 14-month excessive inflation knowledge, whereas worldwide gold costs have additionally dipped to almost a one-month low. The mixture of a powerful US greenback and a subdued world financial backdrop has exerted downward strain on the yellow metallic.
On the worldwide entrance, gold costs on COMEX remained underneath $2,600, with a drop of $24, reflecting continued power within the greenback index. In India, gold costs fell by over ₹500 on the MCX, with 10 grams of 22K gold priced at ₹70,840, and 100 grams at ₹708,400. Gold slipped under ₹75,000 for the primary time since October 10, 2024. As the worldwide financial setting stays difficult, with inflationary pressures and a powerful greenback, the present downtrend suggests additional weak spot in gold costs could also be seemingly. If COMEX gold stays under $2,600 and checks the $2,500 degree within the coming periods, home costs may fall in direction of ₹72,000 per 10 grams.
Wanting forward, whereas near-term weak spot may persist, we imagine gold will proceed to carry its enchantment as a safe-haven asset all through 2024, significantly within the face of financial uncertainty and inflationary pressures. This makes gold a beautiful choice for hedging in opposition to inflation and forex volatility. As such, we preserve a impartial outlook for gold for the rest of the 12 months, anticipating its enchantment to endure even when costs expertise short-term fluctuations.
What ought to Traders do?
The outlook for the Indian market in November 2024 presents a blended however cautiously optimistic image. Whereas there could also be some continued weak spot within the close to time period as a result of ongoing promoting by international portfolio buyers (FPIs) and broader market volatility, a number of components recommend a possible restoration within the coming weeks. The intervention of home institutional buyers (DIIs), who bought ₹1.07 lakh crore value of Indian shares in October, has performed an important function in mitigating the affect of FPI outflows. Moreover, mutual fund homes are sitting on a major warfare chest of ₹2 lakh crore, which offers ample assist to the market if FPI promoting persists.
The festive season is anticipated to spice up home consumption, probably resulting in stronger Q3 outcomes for corporations, significantly in sectors reminiscent of retail, client items, and autos. This might present a much-needed optimistic catalyst for the market within the close to time period. Moreover, the regulatory framework stays supportive, with the Reserve Financial institution of India (RBI) and different regulators more likely to step in ought to there be any drastic market actions.
Technically, the Indian market is at present buying and selling across the 23,600 degree, and whereas there may very well be some restricted draw back from this level, the sturdy home assist ought to assist cushion the market. The 23,300-23,800 vary is seen as a key assist zone, providing engaging entry factors for buyers. Given the basic power of the Indian financial system, which continues to indicate resilience, and the assist from home buyers, any short-term dips current a possibility for long-term buyers.
Disclaimer:
This text shouldn’t be construed as funding recommendation, please seek the advice of your Funding Adviser earlier than making any sound funding resolution.
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